This is being seen as a outcome of the company’s accumulating losses as it faces billions of dollars in costs and liabilities due to its defective airbags.
TK Holdings, its USA operations, filed Chapter 11 bankruptcy in DE on Sunday with liabilities of $10 billion to $50 billion, while the Japanese parent filed for protection with the Tokyo District Court early on Monday.
Scott Caudill, chief running officer of TK Holdings, stated in a court affidavit that the company “faces insurmountable claims” associating to the recalls and owes billions of dollars to automakers.
The problem, though, is that 100 million of the Takata inflators worldwide have been recalled, 69 million in the US alone in the biggest automotive recall in American history.
US-based Key Safety Systems (KSS) has bought all of Takata’s assets, apart from those relating to the air bags.
However, the final figure will be available only when various carmakers, who used Takata airbags, have a discussion and reach a liability figure with the airbag supplier.
The company’s bankruptcy filings Monday cleared the way for a $1.6 billion takeover of most of Takata’s assets by Key Safety Systems, which is based in Detroit but owned by a Chinese company.
Under its agreement with Key, remnants of Takata’s operations will continue to make inflators to be used as replacement parts in the recalls, which are being handled by 19 affected automakers.
Takada said he intends to leave Takata management once the deal with Key Safety Systems is finalized. The arrangement is meant to allow Takata to continue running without interruptions and with minimal interruptions to its supply chain.
The ammonium-nitrate airbag inflator business will remain in a reorganized Takata, which said today that it would keep producing inflators through to 2020, then be wound down.
Honda said it’ll become hard to recoup the majority of its claims against Takata with the bankruptcy filing. His family – which still controls the 84-year-old company – likely would cease to be shareholders.
The AP reports that the $1.6 billion that Takata stands to make from its sale to KSS will be used to satisfy Takata’s settlement of criminal charges with the US government and reimburse automakers affected by the recall.
There is still a risk, however, that because defects only become apparent with the passage of time, more problems could come to light after Takata winds down. Eventually they were forced to recall tens of millions of vehicles. Many owners have been put on waiting lists by their dealers until the parts arrive.
“We look forward to finalizing definitive agreements with Takata in the coming weeks, completing the transaction and serving both our new and long-standing customers while investing in the next phase of growth for the new KSS”, Luo continued.
It also faces hundreds of lawsuits and claims in the United States, Mexico and Canada, including consumer protection lawsuits filed by three states and 100 personal injury and wrongful death claims.
Attorneys for those injured by the inflators worry that $125 million won’t be enough to fairly compensate victims, many of whom have serious facial injuries from metal shrapnel.
In this May 10, 2017 photo, a visitor walks past the logo of Takata Corp.at a Toyota showroom in Tokyo.
The deal may also result in Key becoming a stronger competitor in the global market for air bag and safety technology and help ensure a broadly competitive air bag market for automakers.
Crushed by lawsuits, fines and recall costs, the Japanese auto parts supplier filed for bankruptcy in Tokyo and DE and will sell most of its assets for $1.6 billion to a rival company.